The correct answer is Option (2) → (A), (C), (B), (D)
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(A) An increase in taxes decreases disposable income. (The direct and immediate impact of a tax increase).
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(C) Aggregate expenditure changes by a fraction of tax deduction. (The decrease in disposable income leads to a smaller decrease in consumption, which is a component of aggregate expenditure, based on the Marginal Propensity to Consume (MPC). Note: "tax deduction" should be understood as the amount of the tax increase).
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(B) Aggregate demand schedule shifts downwards. (The decrease in aggregate expenditure, specifically the consumption component, causes the entire Aggregate Demand (AD) curve to shift down or to the left).
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(D) Equilibrium output decreases. (The downward shift of the Aggregate Demand curve leads to a new, lower equilibrium level of output/income).
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